SYDNEY (Reuters) - New Zealand’s economy surged ahead in the third quarter as consumers spent with abandon while homebuilding and tourism boomed, cementing expectations the country’s central bank was done cutting interest rates.
Official data on Thursday showed gross domestic product rose 1.1 percent, above economists’ forecast of a gain of 0.9 percent, putting it among the rich world’s fastest-growing nations.
It was the fifth straight quarter of growth at 0.7 percent or more for the island nation of 4.7 million and took the annual pace of expansion to a rapid 3.5 percent.
Much of the country’s success was simply due to having more people. A record influx of migrants has lifted population growth to a blistering 2.1 percent -- almost three times that of the United States.
More people means more spending on everything from education to health and an ever-rising demand for housing, which has heated home prices across the country.
The upbeat data should give the Reserve Bank of New Zealand (RBNZ) further reason to not lower interest rates when it meets in February, even as inflation and wages growth remain subdued.
The RBNZ has already slashed interest rates three times this year to a record low 1.75 percent to help stoke inflation, which, at just 0.2 percent sits well below the bank’s target band of 1 to 3 percent.
“We are expecting another pretty solid number for the fourth quarter, and more of the same in 2017 if I have a look at some of the forward-looking indicators on consumer confidence and business confidence,” ANZ economist Cameron Bagrie said.
“The economic party has been going on for a while but inflation hasn’t turned up,” he added. “The challenge is for inflation to come around, and I think it will.”
Manufacturing grew 1.2 percent in the quarter while higher visitor numbers boosted tourism exports and retail, trade and accommodation services.
Growth in the overall services sector, which makes up 70 percent of the NZ$255 billion ($176 billion) economy, rose 1.1 percent, while construction jumped 2.1 percent.
A 0.7 percent decline in goods exports, which were hit by falling dairy and meat shipments, was practically the only soft spot. That should change this quarter with dairy prices recovering.
New Zealand’s current account deficit expanded to NZ$1.9 billion in the third quarter, Statistics New Zealand said in a separate statement, a small increase from the June quarter deficit of NZ$1.8 billion.
Reporting by Swati Pandey; Editing by Wayne Cole and Eric Meijer